Friday, December 30, 2011

I'm not so sure that Satoshi Nakamoto could have anticipated the wave of
projects that have been and continue to be inspired by his creation.
At this very moment, one can only imagine the development progressing in
secrecy among the hundreds, if not thousands of computer programmers,
investors, financial types, marketing gurus, or otherwise, that have
found their second wind thanks to the possibilities of Bitcoin.

Unfortunately, I'm not privy to the closely-guarded secrets behind most
of Bitcoin's projects, however many there may be. Many developers,
however, are more than happy to share their ongoing work with the
community, enough to definitely get us excited about Bitcoin's prospects
for next year. So, without further adieu, these are The 10 Most
Anticipated Bitcoin Projects for 2012:

10) BitSynCom and the MeshNet

Though somewhat mysterious about their plans, BitSynCom
recently announced a massive project to assist the growing effort to
launch what can only be described as "the peoples' Internet." Called MeshNet,
it would be a peer-to-peer version of the Internet, dependent on its
users for owning and operating the supporting infrastructure.

BitSynCom hopes to integrate Bitcoin with MeshNet to act as a payment
system to reward those who maintain the infrastructure and provide
bandwidth, and to charge those who use it. The development time for
such an ambitious project will likely extend well past 2012, but we may
see it get legs next year, especially if SOPA comes to pass in its
current form. For more information, you can watch an interview with
Yifu Guo of BitSynCom, here.9) The Bitcoin Bond

"JackH" first mentioned the concept of a Bitcoin Bond back on October
25th of this year. The idea is that a publicly traded entity could be
used as a vehicle through which investors could buy a piece of the
Bitcoin pie while not directly purchasing any Bitcoins. The Bitcoin
buying would be the responsibility of an agent associated with the
"company." It's an arrangement that would sound familiar to anyone who
dabbles in gold and silver ETFs.

The main driver of the project is to mitigate the fragility of the
current relationship between banks and Bitcoin exchanges, as there were
several instances of banks suspending their accounts with Mt.Gox,
Tradehill, and Intersango over the last few months (though it's been
quiet as of late).

The latest hurdle facing "JackH" is the cost of developing the legal
framework for the company, which was quoted at over 200,000 British
Pounds. Yikes! Apparently Mr. H. does have interested investors,
though their pockets aren't quite deep enough to come up with that chunk
of change. He continues to look for cheaper lawyers...

Though several attempts have been made at a browser extension, none have
really proven effective nor have caught on with Bitcoin users, and most
of the development in this field came to a grinding halt when the
bubble burst in June. At the moment, it does not appear that anyone in
the community is working on an extension, but with the pending
implementation of the URI scheme and release of a thin version of the
Satoshi client, a browser extension would be the next logical step and
would make Bitcoin incredibly user-friendly. Hopefully we'll see one
develop in 2012.

7) Bitcoin Options and Futures Trading on the Major Exchanges

2011 will no doubt be remembered as the year that Bitcoinica took
Bitcoin by storm. With leveraged trading, playing the Bitcoin markets
went from tee-ball to the big leagues, seemingly overnight. 2012,
however, will take things to a whole new level. Mt.Gox and Tradehill
have both hinted
at the fact that they will be unveiling futures and options markets as
part of their development plan, with Mt.Gox possibly bringing the
features online as early as next month when they are set to unveil...
well, something.

Giving Mt.Gox, Tradehill, and Bitcoinica a run for their money will be
the ICBIT Stock Exchange. Currently in alpha testing, the exchange promises
options and futures trading, as well as the ability to buy traditional
stocks using Bitcoins, all of the above on margin, of course.

Having access to derivatives will help to smooth out the volatility that
we currently see in Bitcoin trading, and will also give merchants and
miners the ability to hedge their holdings (or future holdings). These
are key components to establishing a respectable currency market, and
will surely generate a lot of interest outside of the Bitcoin community.

Still looking for an official name to distinguish itself from the Electrum client (I like Overbit,
myself), the Electrum Overlay Network is looking to integrate many of
the services that are currently found elsewhere, as well as some that do
not already exist, and bring them under the umbrella of a single
platform. Features will include:

This feature-rich software will be extremely popular and likely catapult
Electrum to the front of the client-race, though you never know what
the next guy has in his back pocket. Speaking of which:

4) Bitcoin Client Upgrades

Though not scheduled for the 0.6 version of Bitcoin, Gavin Andresen has
hinted several times at his increasingly urgent desire to release a thin
version of the standard client. Motivated primarily by the poor
first-time user experience that comes with the full blockchain download,
Gavin's dev team will likely deliver a thin version of the client in
2012. The blockchain is already topping out at 1.2 GB, and we'd hate to
see what it will look like by the end of next year. In fact, most of
us would rather never see it again as long as we know the friendly miner
community is keeping tabs on it. Please Gavin, make the blockchain go
away!

Also sorely needed is the implementation of the Bitcoin URI scheme.
Currently, most Bitcoin transactions happen through the copying and
pasting of ugly-looking strings of numbers and letters (i.e. public
keys) that have to be manually checked and re-checked before a
transaction can take place. With the URI Scheme, the click of a link in
a browser will automatically launch the client and incorporate the
address into a transaction. It's much needed, and we hope to see it
next year.

3) New Bitcoin Transaction Types

I touched on this topic with my post
about Bitcoin 0.6, but it's important enough that it needs to be
repeated. The upcoming version of Bitcoin, and there will no doubt be
more than one iteration in 2012, will support new transaction types.
Essentially, the new version will allow for transactions with multiple
signatures, thus allowing for escrow-type contracts with third-parties
involved.

Having the option for multiple signatures will also add a new layer of
security to Bitcoin, where you will be able to require that your
transactions be signed by two different private keys, stored in
physically separated devices. This added level of security will stop
potential hackers and wallet thieves in their tracks, and make credit
cards look downright irresponsible. It's the reason why new
transactions types are number three on our list.

Already in private alpha-testing on a live server, OT, the brain-child
of Fellow Traveler, is going to be extremely important in 2012. Really,
its relationship with Bitcoin only tells part of the story, but it's an
important relationship nonetheless. Bitcoin is the oil lubricating an
OT machine that will enable such a vast array of financial instruments
and contracts that lawyers everywhere will beg for retirement packages
before they are inevitably smacked in the face with pink-slips as their
jobs are made redundant.

OT will allow for truly anonymous, off-the-blockchain, instantaneous
transactions, thus silencing some of Bitcoin's harshest critics. This
will be a capability so powerful that integration with TOR will almost
be a necessity. Multi-asset trading and smart contracts will be OT's
killer apps, though the power of OT will only be limited by the
imagination.

In addition to his radio and web presence, Max (I'm assuming we're on a
first-name basis) has his own segment on Russia Today called the Keiser Report, with a huge audience that is sympathetic to the Bitcoin cause.

Equally important here is the structured marketing organization starting
to develop within the Bitcoin community that will be extremely
important to promoting the technology in 2012.

---

2011 was a year of growing pains for Bitcoin. It was both loved and
hated by the media and subject to a huge bubble that topped out with a
market cap of over $200 million. Hackers and miscreants took shots at
exchanges and Bitcoin users alike, yet the currency and the community
proved their resilience.

Bitcoin is positioned better than ever to prove to the world its
significance and utility. These incredible projects only hint at some
of what's to come in 2012, which will no doubt be the year that Bitcoin
comes of age.

Tuesday, December 13, 2011

From the Abstract:
Digital currency systems form the triumvirate nexus of government
policies, money, and technology. Each has a global reach and responds
to the needs of business and consumers. E-commerce depends on private
and government financial institutions to enable payment transactions;
the basis of e-commerce. As the United States financial crisis continues
B2B enterprises may need to abandon traditional payment transaction
systems and look to alternatives, in the form of Web based digital
currency systems accessed via the Internet. The various types of digital
currency systems generally fit into five categories: Barter Exchange
Software Systems, Non-Bank Digital Currency Payment Systems, Digital
Precious Metal Systems, Online Value Transfer Software Systems, and
Online Stored Value Transaction Software Systems. Digital currency
systems are not online banking. Digital currency systems use private
electronic monies: electronic tokens, barter-exchange currencies,
digital cash, and stored value e-cash vouchers. We explore the history
of money against a backdrop of banking and government policies that
cause cyclic monetary crisis's, how these current digital systems
operate, how business can thereby benefit in their use, and why digital
currency systems are such an underutilized service in the United States.

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About Me

I am an e-Money researcher and a Founding Director of the Bitcoin Foundation. My career has included senior influential posts at Sumitomo Bank, VISA, VeriSign, and Hushmail.

"Free-market protagonists, such as Matonis, regard cybercash as better than traditional government-issued or -regulated money, because it is determined by market forces and thus nonpolitical in nature." --Robert Guttmann, Professor of Economics at Hofstra University, in Cybercash: The Coming Era of Electronic Money, 2003

"Matonis is quite correct that the new technology makes easier the use of multiple private currencies." --Mark Bernkopf, Federal Reserve Bank of New York, in "Electronic Cash and Monetary Policy", 1996

"Matonis argues that what is about to happen in the world of money is nothing less than the birth of a new Knowledge Age industry: the development, issuance, and management of private currencies." --Seth Godin in Presenting Digital Cash, 1995